The announcement that the government of Dubai would suspend payment of debts incurred by its investment group, Dubai World, has rattled global markets, sparking fears of another dip in the global economy.

The chief concern is that the cash-strapped country, a member of the United Arab Emirates, could spark a similar move by other heavily indebted nations. That threatens to reverse progress that has been made in shoring up the balance sheets of the financial institutions that underwrote its profligacy. If they get the jitters, the rest of the world could feel the pain, as happened a year ago.

Located in the heart of the Persian Gulf, Dubai has little oil of its own. Instead, it relies on business savvy and investment acumen for its wealth, along with a thriving tourism industry. Operating through Dubai World, it developed eye-popping projects at home, like a giant island shaped like a palm tree and the world's tallest skyscraper, and bought some of the world's most visible companies and properties, ranging from golf courses in Scotland to casinos in Las Vegas. In the process, it racked up $59 billion in debt.

That strategy might have made sense during the go-go days of the last decade, but with the bursting of the bubble it was a recipe for disaster. The company is holding blue-chip properties that no one wants, at least not at the prices that Dubai World has been asking — and needs to repay its debt. The global slowdown has hammered its balance sheet. With a $3.52 billion payment falling due Dec. 14, it was last month forced to seek a six-month moratorium on interest payments.

The move was not entirely unexpected, but markets had assumed that if Dubai had problems, Abu Dhabi, the richest emirate, would help out. True to form, Abu Dhabi provided $10 billion in aid earlier this year. The call for the payment suspension suggests that a bailout is not guaranteed.

After international markets plunged on the announcement — the Dow dropped 150 points and oil prices fell 7 percent, while the price of gold jumped — Abu Dhabi said it would buy $10 billion in bonds to provide a quick infusion of cash, but there is no certainty that it will provide more.

Sixty billion dollars is not that big a sum: the global economy could absorb the loss. But two bigger sets of concerns have arisen as a result of the payment suspension. The first is the fear that Dubai is the tip of the iceberg. In terms of other debt bombs, economists are worried about nations like Greece, Lithuania, Mexico or even Britain, which have historically high debt-to-GDP ratios.

Stimulus measures that have maintained demand have kept interest rates low. But once central banks start worrying about inflation and tighten credit, those debts will be difficult to pay off. One indication of the fear is already evident: The price of insuring bonds against a default by Greece went up 16 percent after Dubai suspension; those of Lithuania climbed 6 percent. The cost of insurance against a Dubai default leaped 67 percent.

While governments have been pumping vast sums of money into national economies as stimulus measures, the prices of real estate and other assets have not yet found a floor. Until those prices stabilize, balance sheets will remain weak and investors will be navigating treacherous terrain. Meanwhile, borrowings cannot be repaid if the underlying assets defy valuation.

This leads to further concerns. Financial institutions will be reluctant to lend because their own investments are illiquid. Similar anxiety stoked the economic crisis a year ago. Indeed, Dubai World is a reminder that the recovery remains shaky despite positive signs from many corners of the global economy. It will not take much to reverse the gains of the past few months.

That is the most important lesson of the Dubai World incident. While stock markets are back on a positive trajectory and real estate prices appear to be recovering — at least in some markets — little has been done to address the root causes of last year's crisis. Leverage remains high, assets have not been realistically valued and deadweight has not been cleared off the books of financial institutions. The impetus for reform has receded. Another shock may not be inevitable, but it is possible.

Governments need to be prepared for such a quake. The system needs shock absorbers. That need will grow as governments become more cautious and begin to absorb the stimulus measures of the past year. Tighter monetary policy will increase the likelihood of shocks. At the same time, banks need to look carefully at their loans and find accurate valuations. As long as they inflate their assets' worth, they will be dangerously exposed in the event of a downturn.

A week after the announcement of the Dubai World debt suspension, it looks like its impact will be contained. That is reassuring, but it should not lead to complacency. More debt bombs may yet explode, and their damage may not be so light.